The COVID-19 outbreak has skewed everything from revenues and expenses to cash flows and net income, making it harder than usual to create a believable model of what a company might be worth. Estimates by bankrupt companies and their bondholders or shareholders differ wildly — half a billion dollars, in one case, according to a Bloomberg News commentary. This matters for junior creditors, because it determines whether they’ll get some recovery, or perhaps nothing at all, on their busted holdings. That’s setting off battles among investors, armed with spreadsheets as their weapon of choice. The brawls are playing out in court cases from hospital operators like Quorum Health Corp. to tobacco companies like Pyxus International Inc., and there are likely more on the way. “Right now we’re in a particularly volatile phase in terms of what value is going to look like,” said Peter Friedman, head of the bankruptcy litigation practice at the law firm O’Melveny & Myers. “There are often huge amounts of money at stake — I would expect parties that can’t consensually resolve outcomes will be ready to litigate valuation.” Read more.
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
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